Creditor Rights, Claims Enforcement, and Bond Performance in Merger and Aqcuisitions
CentER Discussion paper Series No. 2017-012
45 Pages Posted: 14 Mar 2017
Date Written: March 9, 2017
This paper shows that country-level differences in creditor protection affect bond performance around cross-border M&A announcements. Using Eurobonds and a global sample of 1,100 cross-border M&As, we find that the bondholders of bidding firms respond more positively to deals that expose their firm to a jurisdiction with stronger creditor rights and more efficient claims enforcement through courts. Positive creditor protection spillovers are enhanced by now-global jurisdictional cooperation in multinational insolvencies and creditors’ ability to do insolvency arbitrage. The spillover effects we observe are stronger for firms with higher asset risk, longer maturity bonds, and a higher likelihood of financial distress.
Keywords: Bondholder Value, Cross-Border Mergers and Acquisitions (M&As), Creditor Rights, Legal Enforcement, Event Study, Eurobonds
JEL Classification: G34, G32, G12, G14
Suggested Citation: Suggested Citation